Wells Fargo Securities Advisors Facing Major Payroll Issues (NYSE: WFC)

Wells Fargo & Co (NYSE: WFC) is setting up its Wachovia Securities advisors up for potential tax problems with payroll changes that went into effect this month.

The new system will set withholding automatically at 25% of brokers’ commissions for taxes, regardless of their actual tax brackets. The new flat rate will be put in place until 2011 for the 11,000 brokers that make up Wells Fargo’s Wells Fargo Advisors brokerage channel.

Wells Fargo acquired Wachovia just over a year ago and did not have a large retail brokerage unit until then.

Teresa Doughtery, a spokeswoman for Wells Fargo Advisors, said that here’s a difference between the ways the two legacy payroll systems operated. She indicated that those changes were communicated to the company’s advisors throughout the integration and that the company is working on a solution for 2011 and beyond.

This year, many of the company’s brokers will face lower take-home pay from withholding because of the 25% flat rate. The new withholding rules will likely affect most advisors producing less than $500,000 annually. The average Wells Fargo produces around $400,000.

Wells Fargo is essentially forcing its lower producing advisors to over-withhold on their taxes, making it so that they won’t get a decent chunk of their compensation until they file their FY 2010 taxes in April 2011. Top advisors making more than $500,000 per year will be able to send in quarterly estimates to avoid a large tax bill the following April and penalties for under-withholding.

Wells Fargo is offering their impacted advisers a one-year loan at 3% interest as a means of cash flow assistance while their money while their compensation is tied up with the IRS.